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New state law to allow state system universities to pursue oil and gas leases

By Andy McNeilStaff writeramcneil@observer-reporter.com

September 28, 2012

A resource extraction bill allowing the leasing of property owned by the Pennsylvania State System of Higher Education for oil and natural gas drilling is headed for the governor’s desk after it received final legislative approval Tuesday.

Under Senate Bill 367, also known as the Indigenous Mineral Resources Incentives Development Act, a state system university, such as California University of Pennsylvania, would retain 50 percent of the revenues received from leases on its property while 35 percent would be allocated for distribution among the other state-owned schools. The remaining 15 percent would be used for tuition assistance at all 14 state system universities.

“This distribution formula benefits all state universities,” state Sen. Don White, R-Indiana, the bill’s sponsor, said in a news release. “Perhaps the best component of the formula is the requirement that 15 percent be set aside for scholarships, which will allow students and their families to directly benefit from this as well.”

State Sen. Tim Solobay, D-Canonsburg, who voted in favor of the bill, said reductions to tuition that could arise from the new law may help increase enrollment at state schools.

According to Cal U. spokeswoman Christine Kindl, the university has no plans for energy extraction on the main campus. However, Cal U.’s Student Association Inc., which is not affected by the new law as a nonprofit organization owned and operated by the students, entered into a lease agreement January 2011 with Antero Resources Appalachian Corp. for natural gas drilling at Roadman Park. Located about a mile from the main campus, Roadman Park includes the football stadium, and makes up part of the university’s “south campus” along with the SAI Farm.

Cal U. football fans can rest assured it’s unlikely the Vulcans will be playing in the shadow of a flaring well since the agreement between SAI and Antero does not permit surface activity, including the establishment of well pads. Kindl said the predominant reason for the lease was to ensure SAI would not lose out on revenues from potential horizontal drilling that could cross under Roadman Park from neighboring properties.

State system spokesman Kenn Marshall said there hadn’t been much contact between state system universities and energy companies because prior to the new law any proceeds would have gone into the commonwealth’s general fund since it technically owns the land. He said a half-dozen state system universities could possibly explore leasing property since they are sitting above Marcellus Shale, including California, Mansfield, Lock Haven, Clarion, Indiana and Slippery Rock.

The bill also extends the ability to enter into leases for resource development, including coal mining, on state-owned land to the Department of General Services, which serves as the state’s real estate agent.

Revenues received for leases on these properties will be apportioned into three areas: the state Oil and Gas Lease Fund, which supports conservation efforts, will receive 60 percent; the Pennsylvania Investment Authority will receive 25 percent; and their host agency will receive 15 percent.

Prior to the new law, which still requires Gov. Tom Corbett’s signature, only a few state agencies, such as the Department of Conservation and Natural Resources and the Fish and Boat Commission, were authorized to enter into such leases.